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DECREE No. 18/2005/ND-CP OF FEBRUARY 24, 2005 STIPULATING THE ESTABLISHMENT, ORGANIZATION AND OPERATION OF MUTUAL INSURANCE ORGANIZATIONS

THE GOVERNMENT

Pursuant to the December 25, 2001 Law on Organization of the Government;

Pursuant to the December 9, 2000 Law on Insurance Business;

At the proposal of the Finance Minister,

DECREES:

Chapter I

GENERAL PROVISIONS

Article 1.- Subjects of regulation

This Decree stipulates the establishment, organization and operation of mutual insurance organizations operating in the insurance business domain.

Article 2.- Principles of organization and operation of mutual insurance organizations

Mutual insurance organizations shall be organized and operate on the following principles:

1. Mutual insurance organizations are legal persons established to deal in insurance for the purpose of mutual assistance among their members being Vietnamese organizations or individuals operating in the same domain or trade or residing in the same geographical area and having the same kind of risks.

The names of mutual insurance organizations must clearly indicate the character of mutual assistance and contain the phrase “mutual insurance”, abbreviated to “BHTH (in Vietnamese).”

2. Members of a mutual insurance organization are both insurance purchasers and owners of the mutual insurance organization.

3. Members of a mutual insurance organization shall all be entitled to participate in managing, inspecting and supervising activities of the mutual insurance organization.

4. Mutual insurance organizations shall take self-responsibility for the business results within the limit of their capital and assets.

Article 3.- Rights of mutual insurance organizations

Mutual insurance organizations shall have the following rights:

1. To possess, use, and dispose of assets under their ownership.

2. To conduct insurance business in accordance with the provisions of law.

3. To decide on the rates of insurance premium to be contributed by their members or refuse to provide insurance in accordance with the provisions of their charters and other relevant provisions of law.

4. To take initiative in selecting insurance operations and geographical areas where they operate, and their organizational scope and structure as appropriate.

5. To decide on the distribution of incomes and handling of their losses in accordance with the provisions of their charters and other relevant provisions of law.

6. Other rights as prescribed by law.

Article 4.- Obligations of mutual insurance organizations

Mutual insurance organizations shall have the following obligations:

1. To conduct business within the scope, geographical area and operation stated in their establishment and operation licenses.

2. To observe the provisions of the legislation on accounting and finance.

3. To preserve and develop their business capital in accordance with the provisions of law.

4. To be responsible for their debts and other financial obligations within the limit of their assets.

5. To ensure the rights of their members and realize their commitments towards their members.

6. To pay taxes and fulfill their financial obligations as prescribed by law.

7. Other obligations as prescribed by law.

Chapter II

MEMBERSHIP

Article 5.- Minimum number of members of mutual insurance organizations

1. The minimum number of members of a mutual insurance organization is 10.

2. Where the number of members of a mutual insurance organization is lower than the minimum number stipulated in Clause 1 of this Article, the mutual insurance organization must immediately report to the Finance Minister on the actual situation, its causes and remedial measures.

Where the mutual insurance organization cannot increase its number of members according to the plan already approved by the Finance Ministry, the Finance Ministry shall base itself on the practical situation to decide to terminate the operation of the mutual insurance organization or to convert it into another form of insurance enterprise in accordance with the provisions of law.

Article 6.- Founding members of mutual insurance organizations

1. Founding members of a mutual insurance organization are organizations and individuals that meet all conditions prescribed by law, join in establishing the mutual insurance organization and commit to purchasing insurance of the mutual insurance organization as soon as this organization is granted an establishment and operation license.

2. Founding members shall not enjoy any preferences compared to other members of the mutual insurance organizations unless otherwise stipulated in the charters of the mutual insurance organizations.

Article 7.- Members of mutual insurance organizations

Organizations and individuals that meet all conditions for entering into insurance contracts in accordance with the provisions of law and have entered into insurance contracts with mutual insurance organizations shall be members of such mutual insurance organizations.

Article 8.- Rights of members of mutual insurance organizations

Members of mutual insurance organizations shall have the following rights:

1. To enjoy the interests stated in the insurance contracts which they have entered into with the mutual insurance organizations.

2. To enjoy the business results of the mutual insurance organizations as stipulated in the charters of such organizations.

3. To participate in or authorize other persons to participate in the members’ congresses of the mutual insurance organizations; to stand for election to, or elect members of, the management apparatuses and other elected titles of the mutual insurance organizations as stipulated in the charters of such organizations.

4. Other rights as prescribed by law.

Article 9.- Obligations of members of mutual insurance organizations

Members of mutual insurance organizations shall have the following obligations:

1. To fulfill the obligations of insurance purchasers in accordance with the terms of the insurance contracts and the provisions of the business insurance legislation.

2. To abide by the charters, internal rules and operation regulations of the mutual insurance organizations as well as resolutions adopted by the members’ congresses.

3. To take responsibility for debts and losses of the mutual insurance organizations within the limit of the insurance premiums already contributed to the mutual insurance organizations.

4. Founding members of mutual insurance organizations must commit to purchasing insurance of the mutual insurance organizations as soon as these organizations are granted the establishment and operation licenses.

5. Other obligations as prescribed by law.

Article 10.- Termination of membership of mutual insurance organizations

1. Membership of a mutual insurance organization shall terminate in one of the following cases:

a/ The insurance contract between the concerned member and the mutual insurance organization is terminated or transferred in accordance with the provisions of law;

b/ The concerned member of the mutual insurance organization dies, for individuals, or is dissolved, goes bankrupt, is merged or consolidated, or terminates its operation, for organizations;

c/ Other cases stipulated in the charter of the mutual insurance organization.

2. Unless otherwise stipulated in the charter of an mutual insurance organization or in the insurance contract, a founding member must not unilaterally terminate its/his/her membership within three years counting from the date the mutual insurance organization is granted an establishment and operation license.

3. The settlement of interests and obligations for members in the cases stated in Clause 1 of this Article shall comply with the provisions of the charters of the concerned mutual insurance organizations and the insurance contracts entered into with such organizations.

Chapter III

GRANT OF ESTABLISHMENT AND OPERATION LICENSES

Article 11.- Grant of establishment and operation licenses to mutual insurance organizations

The grant of establishment and operation licenses to mutual insurance organizations shall comply with the relevant provisions of the Insurance Business Law and its guiding documents. The Finance Ministry shall guide in detail the contents related to the grant of establishment and operation licenses to mutual insurance organizations.

Article 12.- Contracts signed before the grant of establishment and operation licenses

1. Contracts in service of the establishment of a mutual insurance organization may be entered into by its founding members.

2. In cases where a mutual insurance organization is established, this organization shall accept the rights and obligations arising from the contracts already entered into in accordance with the provisions of Clause 1 of this Article, unless otherwise agreed upon.

3. Where a mutual insurance organization is not established, the founding members shall be responsible for performing such contracts.

Article 13.- Contribution of founding capital to mutual insurance organizations

Founding capital of a mutual insurance organization shall be contributed in cash or in valuable papers convertible into cash into a blockaded account opened at a bank licensed to operate in Vietnam. The blockade of this account shall end as soon as the concerned mutual insurance organization is granted an establishment and operation license.

Article 14.- Charter of a mutual insurance organization

1. The charter of a mutual insurance organization must comply with the provisions of this Decree and other relevant provisions of law.

2. The charter of a mutual insurance organization shall be drafted by the founding members in the course of preparing for the establishment of the mutual insurance organization and must be signed by the founding members.

3. The charter of a mutual insurance organization shall contain the following principal contents:

a/ The name and expected location of the headquarter of the mutual insurance organization; the logo of the mutual insurance organization (if any);

b/ The purpose of establishment of the mutual insurance organization;

c/ The field, scope and geographical area of operation; the duration of operation;

d/ The determination of membership, rights and obligations of members of the mutual insurance organization;

e/ The voting mechanism of members;

f/ The names, addresses, rights and obligations of founding members of the mutual insurance organization; of the representatives-at-law;

g/ The founding capital of the mutual insurance organization; the mode of contribution and refund of the founding capital and expenses related to the establishment of the mutual insurance organization;

h/ The financial regulations; principles and bases for reduction of insurance premiums; the mode of distribution of the business results;

i/ The organizational structures, working apparatuses and rules of the members’ congress, the Managing Board, the Directorate and the Control Commission; the entitlement regime for managers and executives; the modes of election and adoption of decisions; principles for settlement of internal disputes;

j/ Other contents of the charter of a mutual insurance organization shall be agreed upon by its members, provided that they do not contravene the provisions of law.

4. The cancellation, replacement, supplementation and amendment of the charter of a mutual insurance organization shall be decided by the plenary congress of its members.

Article 15.- Branches and representative offices

The opening of branches and representative offices of mutual insurance organizations shall comply with the provisions of law applicable to other forms of insurance enterprise.

Chapter IV

ORGANIZATION, MANAGEMENT AND EXECUTION

Article 16.- Organizational and managerial structures of mutual insurance organizations

A mutual insurance organization shall consist of the members’ congress, the Managing Board, the director (general director) and the Control Commission.

Article 17.- Members’ congresses of mutual insurance organizations

1. The members’ congress is a body with the highest deciding power in a mutual insurance organization. The members’ congress of a mutual insurance organization shall include the founding congress, annual congresses and extraordinary congresses.

2. The founding congress of a mutual insurance organization shall proceed according to the following provisions:

a/ Within 03 (three) months as from the date of grant of an establishment and operation license by the Finance Ministry, the founding members must convene the founding congress of the mutual insurance organization with the participation of its founding members.

b/ The founding congress shall discuss and vote on the following basic matters:

- The charter of the mutual insurance organization;

- The organizational and managerial structures of the mutual insurance organization.

c/ Decisions adopted at the founding congress shall be valid only when they are adopted by all founding members and approved by the Finance Ministry.

3. Annual congresses convened by the Managing Board shall be organized at least once a year within 03 (three) months as from the end of the fiscal year.

4. Extraordinary congresses of a mutual insurance organization shall be organized in one of the following cases:

a/ Extraordinary congresses are convened by the Managing Board or Control Commission of a mutual insurance organization to decide on necessary matters which fall beyond the power of the Managing Board or Control Commission stipulated in this Decree and the charter of the mutual insurance organization.

b/ Where at least one third of the total number of members file a written request to convene an extraordinary congress with the Managing Board or Control Commission, within 15 (fifteen) days as from the date of receipt of complete and valid dossiers, the Managing Board must convene a members’ congress. If, past this time limit, the Managing Board fails to convene an extraordinary congress, the Control Commission must convene such a congress to deal with the matters stated in the written request.

Article 18.- Agendas and contents of members’ congresses

1. The person convening a members’ congress must prepare the agenda and contents of the congress.

2. In case of extraordinary congresses stipulated at Point b, Clause 4, Article 17 of this Decree, the group of members representing at least one third of the total members of the mutual insurance organization may propose matters to be included in the agenda of the members’ congress. Such proposals must be made in writing and sent to the mutual insurance organization at least 03 (three) days before the opening date of the congress. The proposals must contain the names of the members who support the proposals and the contents of the matters proposed to be included in the agenda of the meeting.

3. The person convening a members’ congress may decline proposals stated in Clause 2 of this Article in one of the following cases:

a/ The proposal is sent in late or contains incomplete or wrong contents;

b/ The proposed matter falls beyond the deciding power of the members’ congress;

c/ Other cases provided for in the charter of the mutual insurance organization.

Article 19.- Notices to convene members’ congresses

1. At least 10 (ten) days before the opening of a members’ congress, the convening person must send invitations informing the time and venue of the meeting to each member. Enclosed with an invitation must be the congress’s agenda and documents for discussion, serving as a basis for adoption of decisions.

2. A members’ congress shall discuss and decide on matters already included in its agenda and matters proposed by at least one third of the total number of members of the mutual insurance organization.

Article 20.- Right to participate in members’ congresses

1. Members may personally participate in or authorize in writing other persons to participate in a members’ congress.

2. In cases where an insurance contract is transferred during the time between the date of making a list of members and the opening date of a members’ congress, the transferee shall be entitled to participate in the members’ congress.

Article 21.- Contents of members’ congresses

A members’ congress shall discuss and decide on the following matters:

1. Annual reports on the business results of the mutual insurance organization, activity reports of the Managing Board, the Directorate and the Control Commission.

2. Activity plans and business and financial plans of the mutual insurance organization for the subsequent year.

3. Refund of founding capital; appropriations for the setting up of funds as provided for by law; reduction of insurance premiums for members in the subsequent financial year at the proposal of the Managing Board.

4. Decision to mobilize additional capital.

5. Election or dismissal of members of the Managing Board and the Control Commission.

6. Merger, splitting, separation, merger or dissolution of the mutual insurance organization.

7. Amendment and supplementation of the charter of the mutual insurance organization.

8. Remuneration for members of the Managing Board, the Directorate, the Control Commission and other titles (if any) of the mutual insurance organization.

9. Other matters according to written proposals of the Managing Board or of at least one third of the total number of members of the mutual insurance organization.

Article 22.- Provisions on the number of participants and voting in members’ congresses

1. The members’ congress of a mutual insurance organization must be participated by at least the minimum number of members as stipulated in the charter of the mutual insurance organization. A congress must be postponed if there is an insufficient number of members; and it shall be re-convened by the Managing Board or the Control Commission. In cases where a congress is convened for the second time but there is still an insufficient number of members, it shall still be conducted regardless of the number of participating members.

2. Decisions to amend the charter of, to consolidate, split, separate, merge or dissolve, a mutual insurance organization shall be adopted when they are voted for by at least three fourths of the total number of members present at the congress. Decisions on other matters shall be adopted when they are voted for by over one half of the total number of members present at the congress.

3. The voting at a members’ congress shall comply with the provisions of the charter of the mutual insurance organizations.

Article 23.- Managing Boards of mutual insurance organizations

1. The Managing Board is a body that manages a mutual insurance organization and has full power to decide on behalf of the mutual insurance organization on all matters related to the purpose and interests of the mutual insurance organization, excluding matters falling under the jurisdiction of the members’ congress.

2. The Managing Board shall have the following rights and tasks:

a/ To decide on development strategies of the mutual insurance organization;

b/ To propose the members’ congress to decide on the reduction of insurance premiums for members in the subsequent financial year; to decide or handle losses arising in the course of business;

c/ To decide on investment plans;

d/ To decide on solutions to market development, marketing and technology; adopt on purchase, sale, borrowing or lending contracts and other contracts valued at 50% of more of the total book value of assets of the mutual insurance organization or at a lower percentage stipulated in the charter of the mutual insurance organization;

e/ To appoint, remove from office or dismiss the director (general director) and other key managers of the mutual insurance organization; to decide on the levels of salaries and other benefits of such managers;

f/ To decide on the organizational structure and internal management rules of the mutual insurance organization; to open, or terminate the operation of, branches and representatives offices, and to decide on the contribution of capital to, and purchase of shares of, other enterprises;

g/ To submit annual financial settlement reports to the members’ congresses;

h/ To approve the agenda and contents of documents in service of members’ congresses, convene members’ congresses or carry out procedures for gathering opinions for the adoption of decisions by the members’ congresses;

i/ To propose the reorganization or conversion of the form of enterprise or dissolution of the mutual insurance organization;

j/ To have other rights and tasks as prescribed by law and stipulated in the charter of the mutual insurance organization.

3. The Managing Boards shall adopt their decisions by voting at their meetings, gather opinions in writing or in other forms stipulated by the charters of the mutual insurance organizations. Each Managing Board member shall have a vote.

4. A Managing Board shall consist of no more than eleven members. The term of office, criteria, specific numbers, the election and removal from office of members of a Managing Board shall be stipulated in the charter of the mutual insurance organization. Managing Board members must neither be concurrently chief accountants or cashiers of the mutual insurance organization nor parents, spouses, children or blood siblings of these persons.

Article 24.- Managing Board chairmen

1. A Managing Board shall elect its chairman among its members. The chairman of the Managing Board of a mutual insurance organization must have professional prestige and ethics as well as experiences on insurance business activities. The appointment and change of chairmen of the Managing Boards of mutual insurance organizations must be approved by the Finance Ministry. Managing Board chairmen may concurrently work as directors (general directors) of the same mutual insurance organizations, unless otherwise stipulated in the charters of the mutual insurance organizations.

2. Managing Board chairmen shall have the following rights and tasks:

a/ To work out programs and plans of action for the Managing Boards;

b/ To prepare the agenda, contents and documents for, convene and preside over Managing Board meetings;

c/ To sign on behalf of the Managing Boards resolutions and documents adopted by the Managing Boards; organize the adoption of decisions of the Managing Boards in other forms;

d/ To monitor the process of implementation of decisions of the Managing Boards;

e/ To preside over members’ congresses;

f/ Other powers and tasks stipulated in this Decree and the charters of the mutual insurance organizations.

3. Where the Managing Board chairman is absent or loses his/her capacity to perform his/her assigned tasks, the member who is authorized by such chairman shall perform the powers and tasks of the Managing Board chairman. Where no person is authorized, the remaining members shall select one among them to provisionally hold the post of Managing Board chairman.

Article 25.- Managing Board meetings

1. Managing Board chairmen may convene Managing Board meetings:

a/ At least once every quarter, or extraordinary meetings in cases of necessity;

b/ At the proposal of the Control Commission or other persons as stipulated in the charter of the mutual insurance organization.

2. Managing Board meetings shall proceed when they are participated in by at least two thirds of the total number of members. Managing Board decisions shall be adopted if they are approved by a majority of the participants. Where the numbers of votes for and votes against are equal, decisions of the side sharing the opinion of the Managing Board chairman shall be final.

3. Procedures for convening and organizing Managing Board meetings shall be stipulated in the charters or internal management rules of mutual insurance organizations.

4. Managing Board meetings must be fully recorded in the book of minutes. Chairpersons and secretaries shall be jointly responsible for the accuracy and truthfulness of the minutes of Managing Board meetings.

Article 26.- Removal from office, discharge, and addition of Managing Board members

1. Managing Board members shall be removed from office in the following cases:

a/ Having lost their civil act capacity or having their civil act capacity restricted;

b/ Resignation;

c/ Other cases stipulated in the charters of the mutual insurance organizations.

2. Managing Board members shall be discharged under decisions of members’ congresses.

3. Where the number of members of a Managing Board is reduced by over one third compared with the number stipulated in the charter of the mutual insurance organization, the Managing Board must convene a members’ congress within 60 (sixty days) to elect additional Managing Board members.

In other cases, the nearest members’ congress shall elect new members to replace those who have been removed from office or discharged.

Article 27.- Directors (general directors) of mutual insurance organizations

1. The Managing Board shall appoint either one among its members or another person as director (general director). Managing Board chairmen may work concurrently as directors (general directors) of the same mutual insurance organizations. Where the charter of a mutual insurance organization does not stipulate that the chairman of the Managing Board is the representative-at-law, the director (general director) shall be the representative-at-law of the mutual insurance organization.

Directors (general directors) shall run day-to-day activities of mutual insurance organizations and take responsibility to the Managing Boards for the performance of their assigned powers and tasks.

Directors (general directors) of mutual insurance organizations must have professional prestige and ethics, at least 3 years’ practical experiences on business administration or state management of insurance and must reside in Vietnam during their incumbency.

The appointment or change of directors (general directors) of mutual insurance organizations must be approved by the Finance Ministry.

2. Directors (general directors) shall have the following powers and tasks:

a/ To decide on all matters related to day-to-day activities of their mutual insurance organizations, including purchase, sale, borrowing, lending contracts and other contracts valued at under 50% of total book value of the mutual insurance organizations’ assets;

b/ To organize the execution of Managing Board decisions;

c/ To organize the implementation of business plans and investment plans of their mutual insurance organizations;

d/ To propose plans on the organizational structures and internal management rules of their mutual insurance organizations;

e/ To appoint, remove from office or dismiss the managerial titles in their mutual insurance organizations, excluding those titles appointed, remove from office or dismissed by the Managing Boards;

f/ To decide on salaries and allowances (if any) for laborers in their mutual insurance organizations, including managers falling under their appointing competence;

g/ Other powers and tasks as stipulated by laws, the charters of the mutual insurance organizations and decisions of the Managing Boards.

Article 28.- Obligations of managers of mutual insurance organizations

The Managing Boards, directors (general directors) and other managers of mutual insurance organizations shall, within the scope of their responsibilities and powers, have the following obligations:

1. To perform their assigned powers and tasks in an honest and diligent manner in the interests of the mutual insurance organizations and their members.

2. Not to abuse their positions and powers and use assets of the mutual insurance organizations to gain benefits for themselves or other persons; not to give away assets of the mutual insurance organizations to other persons; not to disclose secrets of the mutual insurance organizations, unless it is so approved by the Managing Boards.

3. When the mutual insurance organizations fail to repay all debts and fulfill other asset obligations when they are due, such managers shall have:

a/ To inform all creditors of the financial situation of the mutual insurance organizations;

b/ Not to raise salaries for, and pay bonuses to, workers and employees of the mutual insurance organizations, including managers;

c/ To take personal responsibility for damage caused to creditors due to the failure to fulfill the obligations stated at Points a and b of this Clause;

d/ To recommend measures to overcome financial difficulties of the mutual insurance organizations.

4. Other obligations stipulated by laws and the charters of the mutual insurance organizations.

Article 29.- Powers and tasks of the Control Commissions

1. A mutual insurance organization must have a Control Commission consisting of between three and five members elected by the members’ congress, at least one of whom has expertise in accounting. The Control Commission shall elect its head among its members, who must be a member of the mutual insurance organization. The powers and tasks of the head of the Control Commission shall be stipulated in the charter of the mutual insurance organization.

2. The Control Commissions shall have the following powers and tasks:

a/ To check the rationality and legality in the management and execution of business activities, in the bookkeeping and financial statements;

b/ To evaluate annual financial statements of the mutual insurance organizations; check each concrete matter related to the management and execution of activities of the mutual insurance organizations when deeming it necessary or under decisions of the congresses’ decisions or at the requests of members stipulated in Clause 3, Article 21 of this Decree;

c/ To regularly notify the Managing Boards of the activity results; consult with the Managing Boards before submitting reports, conclusions and proposals to the members’ congresses;

d/ To report to the members’ congresses on the accuracy, truthfulness and legality of the bookkeeping, archival of accounting documents and opening of accounting books, financial statements and other reports of the mutual insurance organizations; the honesty and legality in the management and direction of business activities of the mutual insurance organizations;

e/ To propose measures to supplement, amend and improve the structures of organization, management and direction of business activities of the mutual insurance organizations;

f/ To have other powers and tasks stipulated in this Decree and the charters of the mutual insurance organizations.

The checking stated at Points a and b of this Clause must neither obstruct normal activities of the Managing Boards nor interrupt the execution of day-to-day business activities of the mutual insurance organizations.

Article 30.- Persons who shall not be allowed to work as Control Commission members

1. Managing Board members, directors (general directors); spouses, parents, adoptive parents, children, adopted children, and blood siblings of Managing Board members, of directors (general directors), chief accountants of such mutual insurance organizations.

2. Persons who are being examined for penal liability, serving imprisonment sentences, or deprived by the courts of the right to practice their profession because of their offenses of smuggling, producing counterfeit goods, trading in counterfeit goods, doing illegal business, evading tax, deceiving customers or other offenses in accordance with the provisions of law.

Article 31.- Other matters related to the Control Commissions

The term of office of the Control Commissions, the working regime and remuneration of Control Commission members shall be stipulated in the charters of the mutual insurance organizations or decided by the members’ congresses.

The Control Commissions shall take responsibility before the members’ congresses for mistakes that they make while performing their tasks and cause damage to the mutual insurance organizations.

Chapter V

FINANCE, COST ACCOUNTING AND FINANCIAL STATEMENTS

Article 32.- Legal capital

1. The legal capital of a mutual insurance organization must not be lower than VND 10 billion. Particularly, the legal capital of a mutual insurance organization operating in the domain of agricultural insurance may be lower than the above-said level and comply with separate guidance.

2. The Finance Ministry shall guide in detail the levels of legal capital of mutual insurance organizations for each domain and trade.

Article 33.- Sources of founding capital

Founding capital of mutual insurance organizations shall come from the following sources:

1. Contributions of founding members;

2. Advanced insurance premiums of members;

3. Other lawful sources as provided for by law.

Article 34.- Deposits

1. Within 60 (sixty) days as from the date of being granted the establishment and operation licenses, the mutual insurance organizations must deposit part of their capital into an escrow account at a commercial bank operating in Vietnam. Such deposits shall bear an interest as agreed upon with the bank where the escrow account is opened.

2. Deposit money shall be equal to 5% of legal capital.

Article 35.- Professional reserves

1. Mutual insurance organizations must make appropriations to set up professional reserves from insurance premiums of each insurance operation for the retained liability of the mutual insurance organizations.

2. Professional reserves of a mutual insurance organization include:

a/ Reserve for unearned premiums, which shall be used to compensate liabilities to arise in the validity duration of the insurance contracts in the subsequent year;

b/ Reserve for compensation for unsettled claims, which shall be used to compensate for incurred losses under insurance coverage which have not yet been claimed or have been claimed but have not yet been settled by the end of the fiscal year;

c/ Reserve for compensation for big loss fluctuations, which shall be used to compensate for big loss fluctuations or big losses for which the total amount of insurance premiums retained in the fiscal year, after appropriations for setting up the unearned-premium reserve and the reserve for compensation for unsettled claims have been made, is not enough for paying compensation money with regard to the retained liability of the mutual insurance organizations;

d/ Other kinds of professional reserve as guided by the Finance Ministry.

3. The Finance Ministry shall specify the levels of appropriations and the method of making appropriations for setting up professional reserves for mutual insurance organizations.

Article 36.- Distribution of business results

1. Profit of a mutual insurance organization is the amount being the mutual insurance organization’s total turnover minus total expense.

2. Profit of a mutual insurance organization shall be used for the following purposes:

a/ Repaying loans for establishment of the mutual insurance organization;

b/ Setting up compulsory reserve funds and other funds as prescribed by law;

c/ Serving as a basis for reducing insurance premiums for the insurance contracts renewed in the subsequent financial year;

d/ Other purposes as stipulated in the charter of the mutual insurance organization and relevant legal documents.

Article 37.- Regimes of finance, cost-accounting and reporting

The regulations on management and use of capital and assets, capital investment, solvency, turnover and expenses, compulsory reserve funds, regimes of accounting, statistics, audit and financial statement of mutual insurance organizations shall comply with the provisions of the Government’s Decree No. 43/2001/ND-CP of August 1, 2001 stipulating the financial regime applicable to insurance enterprises and insurance brokerage enterprises, and with the guidance of the Finance Ministry.

Chapter VI

STATE MANAGEMENT OVER MUTUAL INSURANCE ORGANIZATIONS

Article 38.- State management of mutual insurance organizations

1. The Finance Ministry shall perform the state management over the establishment, organization and operation of mutual insurance organizations, covering the following contents:

a/ Guiding the implementation of legal documents on mutual insurance organizations; formulating policies and regulations concerning mutual insurance organizations;

b/ Granting and withdrawing the establishment and operation licenses of mutual insurance organizations;

c/ Promulgating, approving, and guiding the implementation of, rules, terms and tariffs of premiums and insurance commissions that mutual insurance organizations intend to apply;

d/ Applying necessary measures so that mutual insurance organizations can ensure financial requirements and realize their commitments towards insurance purchasers;

e/ Providing assistance in training in insurance operations for building the contingents of insurance managers and professionals for mutual insurance organizations;

f/ Inspecting and supervising insurance business activities, the observance of financial regulations by mutual insurance organizations; settling complaints and denunciations and handling violations of law related to mutual insurance organizations;

2. The ministries, the ministerial-level agencies and the Government-attached agencies shall, within the scope of their tasks and powers, have to perform the state management over the organization and operation of mutual assistance organization in accordance with the provisions of law.

3. The People’s Committees at all levels shall, within the scope of their tasks and powers, perform the state management over the organization and operation of mutual insurance organizations in their localities in accordance with the provisions of law.

Article 39.- Consolidation, splitting, separation, merger and transformation of enterprises, dissolution and bankruptcy of mutual insurance organizations

1. The merger, splitting, separation, merger, transformation and the dissolution of mutual insurance organizations shall comply with relevant provisions of law.

2. Bankruptcy of mutual insurance organizations shall comply with the provisions of the legislation on bankruptcy of insurance enterprises.

Article 40.- Commendation and handling of violations

The commendation and handling of violations in the course of establishment, organization and operation of mutual insurance organizations shall comply with the provisions of Chapter VIII of the Insurance Business Law.

Chapter VII

IMPLEMENTATION PROVISIONS

Article 41.- Effect of the Decree

1. This Decree takes effect 15 days after its publication in the Official Gazette.

2. For matters not stipulated in this Decree, the provisions of the legislation on insurance business and relevant laws shall apply.

Article 42.- Implementation guidance

The Finance Minister shall, within the scope of his/her functions, tasks and powers, have to guide the implementation of this Decree.

The ministers, the heads of the ministerial-level agencies, the heads of the Government-attached agencies and the presidents of the provincial/municipal People’s Committees shall have to implement this Decree.

On behalf of the Government

Prime Minister
PHAN VAN KHAI